A 2020 vision for today's Transfer Agent

Richard Clarkson
Solution Consultant

As we move to 2020 and look forward to the opportunities this can bring to the Transfer Agency landscape, it is worth remembering that many companies are still not sure of the direction to take.  Today's Transfer Agent is caught up in a myriad of Operational and IT challenges following the market and regulatory changes since 2008.  Many in the market are looking at their current complex IT and Operational model and thinking of the next steps.  These are the steps that need to be taken but were deferred for a variety of reasons over the past number of years.

As such, the year 2020 offers many Transfer Agents the chance to streamline their organisations and in particular their Operational and IT bases. Therefore the coming years offer the potential to maximise revenue growth with minimal spend on supporting software and hardware.  Transfer Agents will need to identify a Core Transfer Agency Platform that delivers comprehensive functionality for all business processes and manages complex workflows involving core processing and fund distribution on a common Platform. 

With the correct software a Transfer Agent will then have the opportunity to maximise revenue streams and leverage the value of the Platform.  This can be done expanding the Transfer Agent’s offering and by addressing diverse market segments including Retail Transfer Agency and Distribution Platforms (Sub-TA).

The need to change has been much discussed (see Emerging trends white paper) but many in the industry, both as Asset Managers and Service Providers, are still utilizing sub optimal, legacy applications.  An opportunity now exists to look forward with confidence and invest in the next generation software needed to boost revenue.  It is worth remembering that there have been developments in the past 18 - 24 months that have impacted upon the Transfer Agent.  These include:

  • FinTech and Digital Disruption
  • Regulation
  • End of life software and systems
  • The search for a consistent Global / Regional IT and Operational model
  • The Cloud
  • Market dynamics

There has been much discussion for the past few years on the impact of FinTech, and more recently on digital disruption, within Financial Services.  The Transfer Agency market has not seen the full impact yet as many companies chose to extend the lifespan of current, legacy systems.  However, as Fund investors have become 'tech savvy' and the demand from Regulation continues to grow many organizations now find that they cannot move forward as the market and their clients demand. 

FinTech companies can offer alternatives and we have seen impacts on established market participants.  Nevertheless many FinTechs are not focused on the fundamental aspects of Transfer Agency therefore they do not always cater to the needs of the key players.

The same is true for those offering a transition to the digital market.  It has been found that with the rush to be digitally ready many companies have not received the expected Return On Investment.  To be digitally ready you first need to be on a stable core platform that offers a global foundation for current and future needs.  This requirement is one of the strategic elements that any next generation Transfer Agent platform should provide.

The regulatory burden is again a topic that has been well covered but still draws attention due to the burdens placed on all those in, and who use, Financial Services (see Why expat Americans are giving up their passports).  The modern Transfer Agent system needs to be robust enough to maintain current demands and requirements yet be flexible enough to meet future changes in policy and regulation at a local, regional and global level.

To this end Transfer Agents need to consider those platforms that have unique features allowing the product can to be extended (or adapted) through the use of code 'hooks' via an Extensibility tool.  This gives the Transfer Agent the ability to quickly adapt to any regulatory or client demand without the need to wait for a vendor to complete the work.  A rapid time to market means those with an Extensible, Next Generation application will have a market lead and best of class service for their clients.

Any such Extensibility change should be owned by the Transfer Agent and is therefore controlled and implemented in house ensuring proper processes and oversight can be followed.  Further once this change is promoted to the client's installation it should be able to be applied to future versions of the Core Transfer Agency platform, without issue.

The Core Transfer Agency platform with this feature helps the Transfer Agent strive to the Holy Grail of 'Consistency', from both an IT and Operations perspective.  This consistency must also built on a Platform that is truly a Multi Region, Multi Fund Structure, Multi Currency, Multi Time zone, Multi Lingual application.  In addition, the Transfer Agent should ensure that the software can be deployed as a single instance on a global basis.

This gives the opportunity to have a Global Operating Model that can be fine tuned on a regional and/or local basis, if required.  Transfer Agents with a standard Global Operating Model can ensure like-for-like steady state costs decline and not exaggerated by bespoke models in various locations. Further, with the use of such tools like Extensibility, IT teams will not need to have a myriad of macros and other tactical solutions bolted onto existing applications to ensure a BAU state.

IT teams can further benefit by making use of the best of breed Cloud solutions for their Core Transfer Agency platform.  It is now possible to have leverage Managed Cloud solutions thereby reducing the CapEx requirement of running the Transfer Agency business.

As Service Providers and Asset Managers within the UK and EU markets look to redefine themselves at the dawn of this next stage of evolution we have seen marquee names retreat from market segments, along with over-commitments and under-delivery by others.  This new market evolution will ensure that those Transfer Agents who have the ability to adapt and expand quickly will thrive, placing those with an agile and flexible system at the forefront.

The change in the market is seen in an independent report from PwC which claims that by 2020 we will see the emergence of a new breed of global managers. The report (see PwC 2020 a brave new world) states that the Transfer Agent will be “one that will have highly streamlined platforms, targeted solutions for the customer and a stronger and more trusted brand.”

Following on with this new focus where the Fund 'consumer' now becomes the centre for the Transfer Agent and for Asset Managers we have seen recent developments  in the market place where a technological partner is key to make the progression in this new environment (for example Maitland chooses Oracle). With the need to change to a next generation technological solution many Transfer Agents are seeing Oracle FLEXCUBE Investor Servicing as the fit to their 2020 Vision.

As it is based on the Oracle 'Apps to Disk' Stack it is possible to utilise Oracle FLEXCUBE Investor Servicing within the Oracle Integrated Cloud solution. This makes Oracle the partner of choice when looking for the next generation solution in the dynamic world of Transfer Agency.

Richard Clarkson is the Principal Consultant for FLEXCUBE Investor Servicing at Oracle.  He can be reached at richard.clarkson AT oracle.com or on Twitter @RMClarkson.

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